SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-13233
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BALCOR PENSION INVESTORS-V
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(Exact name of registrant as specified in its charter)
Illinois 36-3254673
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 267-1600
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1995 and December 31, 1994
(Unaudited)
ASSETS
1995 1994
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Cash and cash equivalents $ 32,344,747 $ 16,045,584
Escrow deposits - restricted 591,457 384,625
Accounts and accrued interest receivable 823,003 604,189
Prepaid expenses 442,970
Deferred expenses, net of accumulated
amortization of $473,265 in 1995
and $302,661 in 1994 178,450 349,054
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34,380,627 17,383,452
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Investment in loans receivable:
Loans receivable - wrap-around, first
and junior mortgages 33,092,817 45,975,827
Investment in acquisition loan 8,482,483 8,517,335
Less:
Loans payable - underlying mortgages 2,859,548 3,998,692
Allowance for potential loan losses 5,957,614 5,957,614
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Net investment in loans receivable 32,758,138 44,536,856
Real estate held for sale (net of allowance
of $5,737,890 in 1995 and $6,055,000 in
1994) 49,208,549 51,051,376
Investment in joint ventures - affiliates 5,031,349 5,004,625
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86,998,036 100,592,857
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$121,378,663 $117,976,309
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LIABILITIES AND PARTNERS' CAPITAL
Accounts and accrued interest payable $ 192,362 $ 229,664
Due to affiliates 16,557 136,543
Other liabilities, principally escrow
deposits and accrued real estate taxes 1,018,072 998,713
Security deposits 479,976 356,629
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Total liabilities 1,706,967 1,721,549
Partners' capital (439,305 Limited Partner-
ship Interests issued and outstanding) 119,671,696 116,254,760
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$121,378,663 $117,976,309
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable,
and from investment in
acquisition loan $ 3,601,918 $ 4,458,689
Less interest on loans payable -
underlying mortgages 162,807 296,893
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Net interest income on loans receivable 3,439,111 4,161,796
Income from operations of real estate
held for sale 3,177,587 1,839,348
Interest on short-term investments 628,259 330,359
Participation income 855,241
Prepayment premiums 315,000
Participation in income of joint ventures -
affiliates 139,918 281,142
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Total income 8,555,116 6,612,645
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Expenses:
Amortization of deferred expenses 170,604 95,559
Administrative 539,673 629,343
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Total expenses 710,277 724,902
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Income before equity in loss from investment
in acquisition loan 7,844,839 5,887,743
Equity in loss from investment in
acquisition loan (34,852) (38,522)
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Net income $ 7,809,987 $ 5,849,221
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Net income allocated to General Partner $ 780,999 $ 584,922
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Net income allocated to Limited Partners $ 7,028,988 $ 5,264,299
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Net income per Limited Partnership Interest
(439,305 issued and outstanding) $ 16.00 $ 11.98
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Distributions to General Partner $ 439,306 $ 634,552
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Distributions to Limited Partners $ 3,953,745 $ 6,875,123
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Distributions per Limited Partnership
Interest $ 9.00 $ 15.65
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Income:
Interest on loans receivable,
and from investment in
acquisition loans $ 2,011,663 $ 2,458,360
Less interest on loans payable -
underlying mortgages 78,556 91,392
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Net interest income on loans receivable 1,933,107 2,366,968
Income from operations of real estate
held for sale 1,792,411 716,219
Interest on short-term investments 202,455 150,748
Participation income 855,241
Prepayment premiums 315,000
Participation in income of joint ventures -
affiliates 77,695 152,883
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Total income 5,175,909 3,386,818
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Expenses:
Amortization of deferred expenses 15,118 11,040
Administrative 266,300 298,737
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Total expenses 281,418 309,777
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Income before equity in loss from investment
in acquisition loan 4,894,491 3,077,041
Equity in loss from investment in
acquisition loan (17,426) (19,261)
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Net income $ 4,877,065 $ 3,057,780
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Net income allocated to General Partner $ 487,707 $ 305,778
============= =============
Net income allocated to Limited Partners $ 4,389,358 $ 2,752,002
============= =============
Net income per Limited Partnership Interest
(439,305 issued and outstanding) $ 9.99 $ 6.26
============= =============
Distribution to General Partner $ 244,059 $ 195,247
============= =============
Distribution to Limited Partners $ 2,196,525 $ 2,921,378
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Distribution per Limited Partnership Interest $ 5.00 $ 6.65
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
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Operating activities:
Net income $ 7,809,987 $ 5,849,221
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in loss from investment in
acquisition loan 34,852 38,522
Participation in income of joint
ventures - affiliates (139,918) (281,142)
Amortization of deferred expenses 170,604 95,559
Accrued interest income due at maturity (359,807) (431,240)
Collection of interest income due at
maturity 2,591,071
Net change in:
Escrow deposits - restricted (206,832) (598,145)
Accounts and accrued interest
receivable (357,996) 90,686
Prepaid expenses (442,970)
Accounts and accrued interest payable (37,302) (97,582)
Due to affiliates (119,986) 152,087
Other liabilities 19,359 664,504
Security deposits 123,347 60,605
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Net cash provided by operating activities 9,084,409 5,543,075
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Investing activities:
Capital contributions to joint venture -
affiliate (58,156)
Distributions from joint venture - affiliate 171,350 215,480
Collection of principal payments on loans
receivable 9,731,918 212,778
Improvements to real estate (412,704) (300,000)
Proceeds from sale of real estate 2,570,208
Costs incured in connection with the
sale of real estate (175,495)
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Net cash provided by investing activities 11,827,121 128,258
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Financing activities:
Distributions to Limited Partners (3,953,745) (6,875,123)
Distributions to General Partner (439,306) (634,552)
Principal payments on loans payable -
underlying mortgages (219,316) (271,717)
Repayment of loans payable - underlying
mortgages (4,689,871)
Principal payments on mortgage notes payable (4,004)
Repayment of mortgage note payable (2,241,349)
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Net cash used in financing activities (4,612,367) (14,716,616)
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Net change in cash and cash equivalents 16,299,163 (9,045,283)
Cash and cash equivalents at beginning
of period 16,045,584 23,623,906
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Cash and cash equivalents at end of period $ 32,344,747 $ 14,578,623
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The accompanying notes are an integral part of the financial statements.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
Several reclassifications have been made to the previously reported 1994
statements to conform with the classifications used in 1995, including mortgage
servicing fees which have been reclassified and are included in administrative
expenses during 1995. These reclassifications have not changed the 1994
results. In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the six months
and quarter ended June 30, 1995, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the six months ended June 30, 1994, the Partnership incurred and paid
interest expense on mortgage notes payable for properties held for sale of
$34,585.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates for the six
months and quarter ended June 30, 1995 are:
Paid
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Six Months Quarter Payable
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Mortgage servicing fees $ 55,804 $ 24,352 $ 7,005
Reimbursement of expenses to
the General Partner, at cost: 239,688 239,688 9,552
4. Sale of Real Estate:
In March 1995, the Partnership sold the Comerica Office Building in an all cash
sale for $2,570,208, net of a $379,792 credit against the sale price for tenant
improvements to be completed by the purchaser. The carrying value of the
property was $2,711,823. From the proceeds of the sale, the Partnership paid
$147,500 to an unaffiliated party as a sales commission and $27,995 in other
closing costs. The Partnership recognized a loss of $317,110, which was
written-off against the Partnership's previously established allowance for
potential losses.
5. Real Estate Held for Sale:
The Partnership acquired the Villa Medici Apartments through foreclosure in
March 1995. The property was classified as real estate held for sale as of
December 31, 1994. The Partnership recorded the fair value of the property at
$9,382,780. In addition, the Partnership reduced the basis of the property by
$115,493 for certain receivables, escrows, and costs recognized in connection
with the foreclosure. The property was transferred to real estate held for sale
at its fair value.
6. Investment in Joint Venture - Affiliates:
The Partnership and three affiliates previously funded a $23,000,000 loan on
the 45 West 45th Street Office Building. In February 1995, the participants
received title to the property through foreclosure. The Partnership owns a
21.74% joint venture interest in the property.
7. Subsequent Event:
In July 1995, the Partnership made a distribution of $13,978,685 ($31.82 per
Interest) to the holders of Limited Partnership Interests representing a
regular quarterly distribution of available Cash Flow of $5.00 per Interest for
the second quarter of 1995, a special distribution of $18.00 per Interest from
Cash Flow reserves and a special distribution from Mortgage Reductions of $8.82
per Interest from prior loan repayments and property sales.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-V (the "Partnership") is a limited partnership formed
in 1983 to invest in wrap-around mortgage loans and first mortgage loans and,
to a lesser extent, other junior mortgage loans. The Partnership raised
$219,652,500 from sales of Limited Partnership Interests and utilized these
proceeds to fund thirty-four loans. Currently, there are five loans outstanding
in the Partnership's portfolio, and the Partnership is operating eight
properties acquired through foreclosure and two investments in joint ventures
with affiliates.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1994 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Net Income
---------------------
In June 1995, the borrower of the wrap-around mortgage loans collateralized by
the Club Wildwood, Four Seasons, and Point West mobile home parks prepaid the
loans in full. In connection with these prepayments, the Partnership received
additional interest and participation income. Additionally, income from real
estate held for sale increased due to the Villa Medici Apartments foreclosure
in March 1995 as well as improved operations at several of the Partnership's
properties. As a result, net income increased for the six months and quarter
ended June 30, 1995 as compared to the same periods in 1994. Further
discussion of the Partnership's operations is summarized below.
1995 Compared to 1994
---------------------
Interest income on loans receivable decreased during the six months and quarter
ended June 30, 1995 as compared to the same periods in 1994 due to the
foreclosure of the Villa Medici Apartments in March 1995 and the final interest
income payments received on the Cinnamon Square Apartments loan in 1994. This
decrease was partially offset by the receipt of additional interest income in
connection with the Club Wildwood, Four Seasons and Pointe West mobile home
park loan repayments during the second quarter of 1995.
Interest expense on loans payable decreased during the six months and quarter
ended June 30, 1995 as compared to the same periods in 1994 due to the purchase
of the Seven Trails West Apartments underlying loan in March 1994.
The Partnership currently has two non-accrual loans which are collateralized by
Fairview Plaza I and II and the Seven Trails West Apartments. For non-accrual
loans, income is recorded only as cash payments are received from the
borrowers. Original funds advanced by the Partnership for these non-accrual
loans total approximately $15,080,000. During the six months ended June 30,
1995, the Partnership received cash payments totaling approximately $973,000 of
net interest income on these two loans. Under the terms of the original loan
agreements, the Partnership would have received approximately $1,517,000 of net
interest income during the six months ended June 30, 1995.
Income from operations of real estate held for sale represents net property
operations generated on nine of the properties the Partnership has acquired
through foreclosure. As mentioned below, the Partnership sold the Comerica
Office Building in March 1995. The original funds advanced by the Partnership
total approximately $69,545,000 for the eight remaining real estate
investments. The Partnership foreclosed on the Villa Medici Apartments in 1995.
Additionally, occupancy rates at several of the Partnership's properties
increased in 1995. As a result, income from operations of real estate held for
sale increased for the six months and quarter ended June 30, 1995 as compared
to the same periods in 1994. See Liquidity and Capital Resources below for
further information.
Due to higher Partnership cash balances and interest rates during 1995,
interest income on short-term investments increased for the six months and
quarter ended June 30, 1995 as compared to the same periods in 1994.
In connection with the June 1995 prepayments on the Club Wildwood, Four Seasons
and Point West mobile home parks, the Partnership received participation income
during the six months and quarter ended June 30, 1995.
Prepayment premiums totaling $315,000 were received during the second quarter
of 1995 in connection with the prepayments on the Club Wildwood, Four Seasons,
and Point West mobile home park loans.
Participation in joint ventures with affiliates represents the Partnership's
share of the property operations at the Whispering Hills Apartments and the 45
West 45th Street Office Building. Primarily as a result of lower revenues at
the 45 West 45th Street Office Building, the participation in income of joint
ventures was lower during the six months and quarter ended June 30, 1995 as
compared to the same periods in 1994.
Allowances are charged to income when the General Partner believes an
impairment has occurred, either in a borrower's ability to repay the loan or in
the value of the collateral property. Determinations of fair value are made
periodically on the basis of performance under the terms of the loan agreement
and assessments of property operations. Determinations of fair value represent
estimations based on many variables which affect the value of real estate,
including economic and demographic conditions. The Partnership did not
recognize a provision for potential losses on its loans or real estate held for
sale during the six months ended June 30, 1995 or 1994. Allowances of $317,110
were written off in connection with the sale of the Comerica Office Building in
March 1995.
As a result of the sale of the Comerica Office Building and the full
amortization of the related deferred expenses, amortization expense increased
during the six months and quarter ended June 30, 1995 as compared to the same
periods in 1994. This increase was partially offset by a decrease in the
amortization of deferred expenses relating to the Glades on Ulmerton Apartments
due to the 1994 prepayment of the underlying mortgage loan and the amortization
of the related deferred expenses in 1994.
Decreased legal fees and bank charges resulted in a decrease in administrative
expenses during the six months and quarter ended June 30, 1995 as compared to
the same periods in 1994.
Liquidity and Capital Resources
-------------------------------
The cash position of the Partnership increased as of June 30, 1995 when
compared to December 31, 1994. The Partnership's cash flow provided by
operating activities during 1995 was generated by net interest income received
from the Partnership's loans receivable and short-term investments, and cash
flow from the operation of the Partnership's properties held for sale. This
cash flow was partially offset by the payment of administrative expenses. The
Partnership also generated cash from its investing activities primarily as a
result of the sale of the Comerica Office Building in March 1995 and the
prepayment of the Club Wildwood, Four Seasons, and Point West mobile home parks
loans receivable in June 1995. A portion of the cash provided by operating
activities and investing activities was utilized for financing activities
consisting primarily of distributions to Limited Partners and the General
Partner. The Partnership made a special distribution in July 1995 as described
below and has retained cash reserves for anticipated capital requirements at
certain Partnership properties.
The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit. A deficit is
considered to be significant once it exceeds $250,000 annually or 20% of the
property's rental and service income. The Partnership defines cash flow
generated from its properties as an amount equal to the property's revenue
receipts less property related expenditures. None of the properties have any
underlying debt. During the six months ended June 30, 1995 and 1994, all of
the Partnership's properties generated positive cash flow. In addition, the
Partnership also holds minority joint venture interests in two other
properties. The Whispering Hills Apartments generated positive cash flow for
the six months ended June 30, 1995 and 1994 and the 45 West 45th Street Office
Building operated at a significant deficit during the six months ended June 30,
1995 as compared to positive cash flow during the same period in 1994 due to
lower rental rates in 1995. In addition, significant leasing costs were
incurred in 1995 at the property. These non-recurring expenditures were not
included in classifying the cash flow performance of the property. As of June
30, 1995, the occupancy rates of the Partnership's residential properties
ranged from 92% to 99%, and the occupancy rates of the commercial properties
were 88% at the Harbor Bay Office Building and 98% at the Union Tower Office
Building. The General Partner's goals are to maintain high occupancy levels,
while increasing rents where possible, and to monitor and control operating
expenses and capital improvement requirements at the properties.
Because of the weak real estate markets in certain cities and regions of the
country, attributable to local and regional market conditions such as
over-building and recessions in local economies and specific industry segments,
certain borrowers have requested that the Partnership allow prepayment of
mortgage loans. The Partnership has allowed some borrowers to prepay such
loans, in some cases without assessing prepayment premiums, under circumstances
where the General Partner believed that refusing to allow such prepayment would
ultimately prove detrimental to the Partnership in light of the probable
inability of the properties to generate sufficient revenues to keep loan
payments current. In other cases, borrowers have requested prepayment in order
to take advantage of lower available interest rates. In these cases, the
General Partner evaluates the request for prepayment along with the market
conditions on a case by case basis, and in some cases the Partnership collects
substantial prepayment premiums.
Certain borrowers have failed to make payments when due to the Partnership for
more than ninety days and, accordingly, these loans have been placed on
non-accrual status (income is recorded only as cash payments are received). The
General Partner has negotiated with some of these borrowers regarding
modifications of the loan terms and has instituted foreclosure proceedings
under certain circumstances. Such foreclosure proceedings may be delayed by
factors beyond the General Partner's control such as bankruptcy filings by
borrowers and state law procedures regarding foreclosures. Further, certain
loans made by the Partnership have been restructured to defer and/or reduce
interest payments where the properties collateralizing the loans were
generating insufficient cash flow to support property operations and debt
service. In the case of most loan restructurings, the Partnership receives
concessions, such as increased participations or additional interest accruals,
in return for modifications, such as deferral or reduction of basic interest
payments. There can be no assurance, however, that the Partnership will receive
actual benefits from the concessions.
In March 1995 the Partnership sold the Comerica Office Building in an all cash
sale for $2,570,208. See Note 4 of Notes to Financial Statements for additional
information.
During March 1995, the Partnership was the successful bidder for the Villa
Medici Apartments at a foreclosure sale. See Note 5 of Notes to Financial
Statements and Item 1. Legal Proceedings for additional information.
In June 1995, the borrower of the wrap-around mortgages collateralized by the
Club Wildwood, Four Seasons and Point West mobile home parks prepaid the loans
in full. The Partnership received proceeds of approximately $13,940,771,
consisting of funds advanced of $9,580,171, additional interest income of
$3,198,400, participation income of $847,200, and prepayment premiums totaling
$315,000.
The Partnership and three affiliates funded the $23,000,000 45 West 45th Street
Office Building mortgage loan. The Partnership funded $5,000,000 of the total
loan amount for a participating percentage of approximately 22%. In February
1995, the participants received title to the property through foreclosure.
The Noland Fashion Square Shopping Center loan is recorded by the Partnership
as an investment in an acquisition loan. The Partnership has recorded its share
of the property's operations as equity in loss from investment in acquisition
loan. The Partnership's share of operations has no effect on the cash flow of
the Partnership. Amounts representing contractually required debt service are
recorded as interest income.
In July 1995, the Partnership made a distribution of $13,978,685 ($31.82 per
Interest) to the holders of Limited Partnership Interests representing a
regular quarterly distribution of available Cash Flow of $5.00 per Interest for
the second quarter of 1995, a special distribution of $18.00 per Interest from
Cash Flow reserves, and a special distribution from Mortgage Reductions of
$8.82 per Interest from prior loan repayments and property sales. To date,
including the distribution in July 1995, Limited Partners have received
cumulative cash distributions of $494.07 per $500 Interest. Of this amount,
$377.25 has been Cash Flow from operations and $116.82 represents a return of
Original Capital. The level of the regular quarterly distribution remained the
same as the first quarter of 1995. In addition, during July 1995, the
Partnership paid $842,001 to the General Partner as its distributive share of
the Cash Flow distributed for the second quarter of 1995 and made a
contribution of $280,667 to the Early Investment Incentive Fund.
During 1995, the General Partner used amounts placed in the Early Investment
Incentive Fund to repurchase 832 Interests from Limited Partners at a total
cost of $260,310.
The General Partner presently expects to continue making cash distributions
from the cash flow generated from property operations and by the receipt of
mortgage payments, less payments on the underlying loans, fees to the General
Partner and administrative expenses. The General Partner believes it has
retained, on behalf of the Partnership, an appropriate amount of working
capital to meet current cash or liquidity requirements which may occur.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
BALCOR PENSION INVESTORS-V
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-------------------------
(a) Villa Medici Apartments
As previously reported, the Partnership received title to Villa Medici
Apartments through foreclosure in March 1995. On June 19, 1995 the U.S.
Supreme Court denied the borrower's petition for writ of certiorari asking the
Supreme Court to review the U.S. Court of Appeals' decision which permitted the
Partnership to proceed with its foreclosure action (Wiston XXIV Limited
Partnership vs. Balcor Pension Investors-V, Case No.: 94-3281). As a result,
all legal proceedings relating to the Partnership's interest in the property
have been dismissed.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits:
(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1
dated January 16, 1984 to the Registrant's Registration Statement on Form S-11
(Registration No. 2-87662) and Form of Confirmation regarding Interests in the
Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for
the quarter ended June 30, 1992 (Commission File No. 0-13233) are incorporated
herein by reference.
(27) Financial Data Schedule of the Registrant for the six month period ending
June 30, 1995 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALCOR PENSION INVESTORS-V
By: /s/Thomas E. Meador
----------------------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors-V, the General Partner
By: /s/Brian D. Parker
----------------------------------------
Brian D. Parker
Senior Vice President, and Chief Financial
Officer (Principal Accounting and Financial
Officer) of Balcor Mortgage Advisors-V, the
General Partner
Date: August 10, 1995
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